Powell Drops Tariff Truth Bomb Rate Cuts Were THIS Close!

Powell: Tariffs Delayed Potential Fed Rate Cuts This Year

Federal Reserve Chair Jerome Powell has indicated that the central bank would likely have lowered interest rates this year were it not for the imposition of tariffs by President Donald Trump. This revelation came during a central banking forum in Sintra, Portugal, sparking widespread discussion about the influence of trade policies on monetary decisions.

When directly questioned about whether the Fed would have already cut rates, Powell responded affirmatively, stating, "I do think that's right." This admission underscores the significant impact of Trump's tariffs on the US economic outlook and the Fed's subsequent policy stance.

Key Points to Consider:

• The Fed has maintained steady interest rates throughout the year, carefully monitoring the economic impact of the tariffs.
• Central bankers have broadly acknowledged the expected effects of Trump's tariffs on the US economy.
• The Fed adopted a "wait-and-see" approach to fully assess the situation before considering rate cuts.

However, this cautious strategy has drawn sharp criticism from former President Trump, who has repeatedly attacked Powell for not lowering rates. Trump has publicly labeled Powell as a "numbskull" and a "moron," reflecting his frustration with the Fed's policies.

On social media, Trump posted a handwritten note criticizing Powell for maintaining higher interest rates compared to other nations, claiming that it "cost the USA a fortune." This note was reportedly delivered to the Fed the same day, highlighting the ongoing tension between the former President and the central bank.

Diverging Opinions Within the Fed:

While Powell has remained relatively neutral, some of his colleagues have voiced their perspectives on potential rate cuts:

• Fed Vice Chair for Supervision Michelle Bowman and Fed Governor Christopher Waller have suggested the possibility of a rate cut as early as July.
• However, they emphasized that such a decision would depend on the severity of tariff-induced inflation.
• Their views diverge from Trump's demand for substantial rate cuts, advocating for a more measured approach.

Despite these internal discussions, a rate cut in July appears improbable. Market indicators reveal that investors estimate an 81% chance of the Fed maintaining current rates at its July 29-30 meeting, compared to only a 19% chance of a quarter-point rate cut.

Powell clarified that most Fed officials anticipate lowering rates later in the year, contingent on developments in inflation and the labor market. "A solid majority of (Fed officials) do expect that it will become appropriate later this year to begin to reduce rates again," he stated.

When pressed about the possibility of a July rate cut, Powell remained ambiguous, stating that he "can't say" and wouldn't rule any meeting "off the table or put it directly on the table."

European Central Bank President Christine Lagarde has publicly supported Powell's data-driven, apolitical approach to policymaking. She lauded him as an "epitome of the standard of a courageous central banker."

Powell has consistently avoided commenting on Trump's criticisms, emphasizing his commitment to focusing on his responsibilities. "I’m very focused on just doing my job," he affirmed.

Lagarde echoed this sentiment, stating that she and her colleagues would handle Trump's criticism in the same manner as Powell. Attendees at the conference responded with applause to Lagarde's supportive remarks.

"We’re trying to deliver macro stability, financial stability, economic stability for the benefit of all the people," Powell concluded. "If we’re going to do that successfully, we need to do it in a completely non-political way, which means we don’t take sides. We don’t play one side against the other. We stay out of issues that are really not our bailiwick."

In conclusion, Powell's recent statements highlight the intricate interplay between trade policies and monetary decisions. While the Fed navigates these challenges, its commitment to data-driven analysis and apolitical decision-making remains paramount, ensuring the stability and prosperity of the US economy.

Tags: Federal Reserve, interest rates, Jerome Powell, Donald Trump, US economy, tariffs, rate cuts, central bank, US policy, Trump tariffs

Source: https://edition.cnn.com/2025/07/01/economy/jerome-powell